Velocita Corp., a carrier’s carrier that is building a network for AT&T Corp., announced Tuesday reaching an agreement with a consortium of banks for a third extension on its waiver of certain financial covenants.
The waiver extending through May 15 restricts further borrowing under the credit facility and requires the company to comply with other covenants.
Velocita, based in Falls Church, Va., is continuing to pursue financing alternatives, including an agreement with its bank lenders to modify the terms of its credit agreement.
Cash strapped and in the middle of a network build, Velocita is considering several restructuring alternatives.
They include debt restructuring, the sale of the company to one or more strategic investors, the disposition of the entire business or assets and a filing for protection under Chapter 11 of the U.S. Bankruptcy Code, the company said in a 10-K filing with the Securities and Exchange Commission.
As of March 31 Velocita had lit 2,400 route miles. Velocita, which uses Cisco Systems Inc. IP and optical gear, anticipates needing a minimum of $140 million to $160 million to complete construction of a 14,050-mile network. The company has scaled back its network build to approximately 14,000 route miles, compared to an original plan to construct 20,000 route miles.
“This (funding) does not include amounts that will be needed to fund operating losses through the date of completion and beyond, amounts required to service our existing debt and any amounts payable under our contractual purchase obligations beyond our currently planned network,” the company said in the 10-K filing.
The company had $63 million of cash on hand as of March 31 and $380 million of debt outstanding under its credit facility as of April 15. Velocita expects $150 million through the fourth quarter of 2003 through dark fiber sales agreements with AT&T, Touch America and others.
On Tuesday Velocita gave no assurances it could obtain an amendment or waiver under its credit agreement.
”The company is unable to predict when or if it will be able to obtain the necessary modifications of its credit agreement from its banks or whether the banks will at any point pursue any or all remedies available to them,” Velocita released in a statement.
In February Velocita retained UBS Warburg as a financial advisor and disclosed plans to let go 181 employees, representing 75 percent of its work force.
